Gas station owners making 'pennies'

Although gas prices are staying near $3 a gallon these days, service station owners aren't making much on the gas they sell, according to a representative for Arizona's petroleum marketers.

"As gas prices go up, retailers actually make less money," said Andrea Martincic, spokeswoman for the Arizona Petroleum Marketers Association, during a visit Friday to Yuma. "Like

the consumer, they are hurting too. It's a very hard business for them to be in."

Martincic explained that crude oil price increases drive up the cost of refining it into gasoline, which ultimately cuts into the retailer's profits.

While the retailer does pass on the cost increase to the consumer as often as possible, it depends on how much the market will bear.

The Arizona Petroleum Marketers Association (APMA) is a nonprofit trade association of independent petroleum marketers and convenience store owners who purchase refined petroleum products such as gasoline and diesel fuel from a supplier - usually a major oil company or independent refiner - and then resell the products at the wholesale or retail level.

Martincic stopped in Yuma as part of a tour through Arizona to talk about the reasons gas prices continue to stay near record high levels.

Even though crude oil prices are staying near $100 per barrel, refiners, wholesalers and retailers are all actually making less money now, she said.

"A lot of times consumers don't know that," Martincic said. "They think the guy who's selling the fuel is just raking in profits when they are actually making pennies on the gallon."

For example, based on 2006 statistics from the National Association of Convenience Stores, for every dollar paid at the pump, consumers paid an average of 56 cents for the crude oil costs, 18 cents for state and national taxes, 17 cents for refining and only 9 cents for "post-refinery" costs, such as distribution.

In 2006 the average price of a gallon of gasoline was $2.57, with an average retailer markup of 13.7 cents, according to the NACS information.

Of that average 13.7 cent markup, which is the retailer's profit margin, six cents went to operating costs, four cents went to credit card fees, two cents went to amortization of equipment and one cent to inventory shrinkage, according to the NACS.

"So after you factor in all these costs, sometimes retailers are left with less than a penny in profit for each gallon of gas," Martincic said.

Martincic explained that there have also been a number of changes in the gasoline market in the past three to five years, specifically when it comes to the stations where motorists buy their gas.

She said the Arizona Department of Weights and Measures did a survey in December 2006 and found that 93 percent of the state's 2,174 gas stations are independently owned by companies or run by a small business owner.

"It used to be that most of the gas stations were owned by the refiners," Martincic said. "Five years ago if you saw a gas station with a corporate sign, that is who owned it, but that isn't the case anymore. While (the refiner) may still supply the gasoline to that station, they may no longer own it."

Big oil companies can make more money in oil exploration and in refining, which has led to many of them selling off their gas stations, which have always had low profit margins, according to Martincic.

Another shift, according to Martincic, is that independently owned gas stations are buying more of what is called unbranded gasoline - which is gasoline made by an independent refiner.

"That allows them to shop around and get the best price," Martincic said. "They are essentially buying excess fuel in an attempt to stay competitive."

The downside to purchasing unbranded gasoline, Martincic said, is that since these independent owners don't have any purchasing agreements, if there is any type of shortage, they will be the ones to lose their supply first.

She also added that the demand for gasoline in Arizona has increased in the past two years, even as gas prices have also risen steadily.

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James Gilbert can be reached at jgilbert@yumasun.com or 539-6854